Dial a Car, Inc. v. Transportation, Inc. And Barwood, Inc.

82 F.3d 484, 317 U.S. App. D.C. 240, 1996 WL 206527

• Court: Court of Appeals for the D.C. Circuit
• Decided: June 28, 1996
• Docket: 95-7143
• Status: Published

Opinions

Opinion for the Court filed by Chief Judge HARRY T. EDWARDS.

Separate concurring statement filed by Chief Judge HARRY T. EDWARDS.

Separate opinion, concurring in part and dissenting in part, filed by Circuit Judge SILBERMAN.

HARRY T. EDWARDS, Chief Judge:

Appellant Dial A Car, Inc., a company that provides on-call taxi transportation to corporate account customers, alleges that two other taxi companies, Transportátion, Inc. (doing business as “Red Top”) and Barwood, Inc., are illegally providing reduced-price competition in this line of work in the District of Columbia even though they are not licensed to provide such services within the city. Appellant raises two principal claims. First, Dial A Car charges that appellees have attempted to monopolize the market for corporate account taxi service, in violation of the Sherman Antitrust Act. Second, appellant alleges that Red Top arid -Barwood have violated the Lanham Act, a federal statute that proscribes false advertising and misstatements of fact in the commercial context, by falsely asserting in their promotional literature that they lawfully may perform corporate account services within the District. Both of these claims were dismissed by the District Court. We affirm.

The Sherman Act claim is unsupportable because Dial A Car has failed to allege an antitrust injury and has also failed to plead facts indicating any probability that appellees will be able to monopolize the relevant market. Furthermore, the alleged misrepresentation of fact upon which Dial A Car has premised its Lanham Act claim is more appropriately viewed as a disagreement about the proper interpretation of local taxicab regulations promulgated by the D.C. Taxicab Commission. Because the Commission itself has not resolved this disagreement, we find-that appellees’ legal status as on-call providers of corporate account services within the District is a contested question of statutory interpretation rather than a clearly established fact. Therefore, the statements at issue cannot form the basis of a Lanham Act claim.

I. BACKGROUND

A. The Dispute

Dial A Car is licensed in the District of Columbia to operate corporate account, or “Blue Car,” service that provides on-call, point-to-point transportation billed on a contract, rather than a tariff, basis. Blue Car service generally uses unmarked luxury cars and is consequently more expensive than regular taxicab service, which Dial A Car does not provide. Although Red Top and Barwood both maintain fleets of cars licensed to provide Blue Car service in D.C., Dial A Car filed suit against appellees for antitrust and false advertising violations based on their alleged operatiori of Blue Car service in the District using regular taxicabs. These taxicabs aré licensed in Virginia arid Maryland, respectively, but not in D.C.

The D.C. Code provides that “[n]o person ... shall operate a taxicab ... or taxicab service within the District without first procuring all applicable licenses required by the Commission ... or in the event of licensure by another jurisdiction pursuant to reciprocal agreement.” D.C.Code § 40-1719(a) (1990); see also Lim v. District of Columbia Taxicab Comm’n, 564 A.2d 720, 723 (D.C.App.1989) (The court noted that authority for Virginia cabs to operate in D.C. is granted under a reciprocity agreement.). The reciprocal agreement in this ease is set out in D.C. Taxicab Commission Office Administrative Order No. 4 (“Order No. 4”). According to appellant, Order No. 4 permits regular Red Top and Barwood taxicabs to drop off passengers in the District of Columbia only if they were picked up in the cabs’ county of licensure (Arlington County, Virginia or Montgomery County, Maryland, respectively), and to pick up passengers in the District only if the passengers have a direct destination within those same counties.

Appellees concede that these limitations apply to their standard taxicab service, but contend that the restrictions do not apply when their taxicabs provide Blue Car service. Dial A Car argues that Order No. 4 still applies to regular taxicabs when they purport to provide Blue Car service, or at least that, if the taxicabs are providing Blue Car service, they must be licensed as Blue Cars subject to a different set of regulations, which appellees’ taxicabs are not. Appellant alleges that, by using regular taxicabs to provide Blue Car service in violation of Order No. 4, appellees can offer lower prices than Dial A Car. Therefore, according to appellant, the violation is a form of predatory conduct intended to drive Dial A Car out of business and to monopolize Blue Car service in violation of the Sherman Act. Appellant also claims that Red Top and Barwood are violating the Lanham Act by misrepresenting to Dial A Car’s actual and potential corporate account customers that their taxicabs can legally provide within the District the same Blue Car service as Dial A Car.

B: Proceedings Before the District Court

After Red Top filed a motion to dismiss and Barwood moved for judgment on the pleadings, Dial A Car attempted to submit a declaration from the D.C. Taxicab Commission’s General Counsel. The declaration stated the General Counsel’s belief that Order No. 4 applies to “all operations of taxicabs licensed in jurisdictions other than the District of Columbia ... regardless of the method of payment or means of dispatch.” Decl. of George W. Crawford ¶ 6, reprinted in Joint Appendix (“J.A.”) 64, 55. The District Court refused to consider the declaration, however, deciding instead that the motions to dismiss' “can and should be resolved on the basis of the complaint.” Dial A Car, Inc. v. Transportation, Inc., Civ. Action No. 93-2170, 1994 WL 902774, slip op. at 2 (D.D.C. Sept. 8, 1994) (Order Denying Plaintiffs Motion for Leave to File Supplemental Material), reprinted in J.A. 68, 69.

Following oral argument, the District Court granted appellees’ motions and dismissed Dial A Car’s complaint in its entirety. Dial A Car, Inc. v. Transportation, Inc., 884 F.Supp. 584, 593 (D.D.C.1995). The court first dismissed the Sherman Act claim on the grounds that Dial A Car had failed to show any antitrust injury or to allege facts sufficient to establish the essential elements of an attempted monopolization claim, namely, a specific intent to destroy or control competition and a dangerous probability of successful monopolization. The District Court then dismissed appellant’s Lanham Act claim because the alleged false representations of fact were merely opinions as to the legality of appellees’ activities under D.C. regulations. The court ruled that the D.C. Taxicab Commission had not yet resolved the question of whether taxicabs otherwise unlicensed in D.C. can be used to provide Blue Car service, and that, therefore, appellant’s Lanham Act claim was not cognizable.

II. Analysis

A The Sherman Act Claim

Dial A Car claims that Red Top and Barwood are illegally attempting to monopolize the market for Blue Car service within the District of Columbia, in violation of section 2 of the Sherman Act.¹ However, a plaintiff claiming federal antitrust violations must plead and prove “more than injury causally linked to an illegal presence in the market.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977). Because the antitrust laws “were enacted for ‘the protection of competition, not competitors,’ ” id. at 488, 97 S.Ct. at 697 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521, 8 L.Ed.2d 510 (1962)), appellant must allege facts that would show an anti-competitive impact on the market as a whole.

The District Court found that Dial A Car had pleaded no facts that would show that appellees’ conduct was anticompetitive. Indeed, the introduction of both Barwood and Red Top into the market (whether legal or not) would appear to be fostering competition, rather than reducing it. While Dial A Car alleges injury to itself, that injury in-volves only one specific competitor and is insufficient to support a finding that the market as a whole is or will be injured.

Appellant argues that its complaint goes beyond alleging only a competitive injury to itself because the complaint also alleges that, “if and when they succeed in eliminating Plaintiff as a competitor in the Relevant Market ... Defendants intend to replace their illegal low-priced Relevant Market service by Regular Taxicab with their own, lawful, higher-priced Blue Car Relevant Market services, without fear of competition.” Compl. at ¶ 39c, reprinted in J.A. 1, 13.' Thus, appellant analogizes appellees’ behavior to a predatory pricing case, where a party initially increases competition, but only to drive competitors out of the market and achieve monopoly power.

Although the complaint offers no evidence that appellees have such a plan, appellant argues that, at this stage in the proceedings, it need only provide a ‘“short and plain statement of the claim showing that the pleader is entitled to relief.’ ” Brief of Appellant at 6 (quoting Fed.R.CivP. 8(a)(2)). However, although Dial A Car is correct that motions to dismiss antitrust claims “should be granted very' sparingly,” Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976), in this case, appellant not only fails to allege any facts supporting its claim that appellees eventually plan to wield monopoly power, it also offers nothing to indicate that monopolization of the relevant market is even possible, let alone probable, see Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 890-91, 122 L.Ed.2d 247 (1993) (A claim of attempted monopolization must show that defendants have “engaged in predatory or anticompetitive conduct with ... a specific intent to monopolize and ... [have] a dangerous probability of achieving monopoly power.”).

Predatory pricing claims, because they are premised on a temporary increase in competition, inherently ask the court to penalize potentially beneficial conduct. See Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 122 n. 17, 107 S.Ct. 484, 495 n. 17, 93 L.Ed.2d 427 (1986) (“[T]he mechanism by which a firm engages in predatory pricing— lowering prices — is the same mechanism by which a firm stimulates competition_”). Therefore, plaintiffs must establish that the defendant’s alleged predatory conduct actually threatens to harm rather than to advance the cause of competition. See Brooke Group, Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 223-26, 113 S.Ct. 2578, 2588-89, 125 L.Ed.2d 168 (1993). A plaintiff must show, first, that the defendant would be able to achieve a monopoly position in the relevant market, and, second, that it could sustain that position after it wields its power and raises prices, or, as Dial A Car argues here, substitutes higher-priced luxury sedans for lower-cost taxicabs. See id. at 225-26, 113 S.Ct. at 2589.

Appellant’s complaint - satisfies neither of these requirements. As the District Court held:

[Appellant] has failed to allege any facts showing that [appellees] have the kind of actual or probable market power necessary to exclude competition generally from the market or to force Dial A Car out of the market. Dial A Car has failed even to allege any facts demonstrating that the market is capable of being monopolized, what market share of the Corporate Account Service business [appellees] possess, or any facts concerning [appellees’] market positions relative to other market participants.

884 F.Supp. at 590-91. Dial A Car’s own complaint acknowledges that there are multiple Blue Car service providers in competition with appellees, and there is no reasonable basis for believing that all other competitors for on-call, point-to-point transportation will be driven out of business.² Indeed, since Dial A Car is not alleging a conspiracy in restraint of trade, Barwood and Red Top would presumably compete with each other, and there is no allegation that either company could or would achieve the monopoly on which a section 2 claim must be predicated.

Even if there were a likelihood that either Barwood or Red Top could achieve monopoly power through low-priced services, there is no basis for believing that either company could sustain its monopoly once it raised prices. The complaint alleges that, after Dial A Car’s elimination from the market, appel-lees intend to replace their taxicabs with luxury sedans and operate “without fear of competition.” Yet, by appellant’s own admission, there are other taxicab and Blue Car providers poised to take business away from any company attempting to exercise monopoly power by raising rates. Any of these companies would be free to offer lower prices as soon as either or both appellees raised theirs. Equally important, appellant’s complaint does not allege any barriers that would prevent entry into the market by any number of additional providers. See United States v. Baker Hughes Inc., 908 F.2d 981, 987 (D.C.Cir.1990) (“In the absence of significant barriers [to entry], a company probably cannot maintain supracompetitive pricing for any length of time.”).

While the Supreme Court has indicated that courts should be reluctant to dismiss antitrust claims because the relevant facts are often in the possession of the defendant, see Hospital Bldg. Co., 425 U.S. at 746, 96 S.Ct. at 1853, in this case such solicitude is not warranted. Evidence regarding the market as a whole is surely as available to Dial A Car as it would be to Red Top and Barwood. Therefore, since Dial A Car did not allege any factual basis for a legitimate claim under section 2 of the Sherman Act, the District Court properly granted appellees’ motions to dismiss. See Brooke Group, 509 U.S. at 226, 113 S.Ct. at 2589 (“In certain situations — for example, where the market is highly diffuse and competitive, or where new entry is easy ... summary disposition of the case is appropriate.”).

B. The Lanham Act Claim

We also reject appellant’s Lanham Act claim. The Lanham Act imposes liability on “[a]ny person who ... uses in commerce any ... false or misleading description of fact, or false or misleading representation of fact, which ... in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.” 15 U.S.C. § 1125(a)(1)(B) (1994). Cases interpreting the Lanham Act have imposed a five-prong test to determine liability, see, e.g., ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 963-64 (D.C.Cir.1990), but it is only the first prong — whether the advertising was false or misleading — that is at issue here. The key question, therefore, is whether ap-pellees’ representations that they are permitted to provide the taxi service at issue qualifies as a false or misleading statement of fact for Lanham Act purposes.

Dial A Car claims that appellees misrepresented to Blue Car customers that their taxicabs were authorized to provide the same corporate account services as Dial A Car provides. Appellant maintains that Order No. 4 clearly prohibits Barwood and Red Top from using regular taxicabs to provide Blue Car service in the District and that any representation to the contrary is therefore a false statement of fact. The District Court disagreed with appellant’s interpretation of the Commission’s order, observing that “it is not even clear on the face of ... Order No. 4 that it applies to transportation services of the kind Red Top and Barwood are alleged to have provided in the District of Columbia.” 884 F.Supp. at 592.

We need not resolve this question of statutory construction, however, because, no matter which view is right, there is no dispute that such a question is within the jurisdiction of the D.C. Taxicab Commission. There is also no dispute that the Commission has not addressed, in an adjudication or any other formal ruling, whether appellees’ provision of Blue Car service using regular taxicabs does indeed violate Order No. 4. Thus, it appears that appellant is simply using the Lanham Act to try to enforce its preferred interpretation of Order No. 4 instead of adjudicating the issue before the Commission. We reject such a gambit because we see no reason to reach out and apply federal law to this quintessentially local dispute, and neither appellant nor our dissenting colleague cites to- any Supreme Court or federal appellate decision that authorizes us to do so. In short, it would be unthinkable for a federal court to suggest that a regulated taxicab company can be held liable under the Lanham Act for failing to anticipate the court’s subsequent interpretation of a municipal regulation. Rather, we hold that, at a minimum, there must be a clear and unambiguous statement from the Taxicab Commission regarding ap-pellees’ status before a Lanham Act claim can be entertained.³

Moreover, even if appellant were to persuade the Commission to issue such a clear statement, this would still not show that the law was clear at the time appellees made the alleged misstatements. In other words, appellant cannot pursue this lawsuit with a simple assertion that current D.C. law is seen to be clear and unambiguous, based on an interpretation by the D.C. Taxicab Commission that was issued subsequent to appel-lees’ statements. Rather, the proper inquiry is whether the law was unambiguous at the time appellees’ alleged misstatements were made.4

The Third Circuit has rejected a Lanham Act claim in an analogous ease, where the plaintiff sought to rest its action on an alleged violation of. regulations issued pursuant to the Food,. Drug and Cosmetic Act. See Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 230-32 (3d Cir.1990). In Sandoz, the plaintiff claimed that Vicks had falsely listed an ingredient in its cough formula as “inactive” even though the ingredient enabled the supposedly “active” ingredients to work faster. Sandoz argued that, as a matter of common sense, if the ingredient in question helped to relieve coughs in any way, it must be considered an active ingredient for labeling purposes. The Third Circuit rejected Sandoz’s Lanham Act claim, however, stating that “[sjuch an interpretation of FDA regulations, absent direct guidance from the promulgating agency, is not as simple as Sandoz proposes.” Id. at 230. The court refused to find “ ‘as a matter of common sense’ or ‘normal English,’ that which the FDA, with all of its scientific expertise, has yet to determine.”' Id. at 231. Most importantly, the court explicitly rejected “the theory that it is appropriate for a court in a Lanham Act case to determine preemptively how a federal administrative agency will interpret and enforce its own regulations.” Id. According to the court, Sandoz’s position would require it “to usurp administrative agencies’ responsibility for interpreting and enforcing potentially ambiguous regulations.” Id. Noting that neither the Food, Drug and Cosmetic Act nor the Federal Trade Commission Act provides a private right of action, the court concluded that what those statutes “do not create directly, the Lanham Act does not create indirectly, at least not in cases requiring original interpretation of these Acts or their accompanying regulations.” Id.

The same considerations that led the Third Circuit to reject the claim in Sandoz control here. By entertaining appellant’s claim, we would be transforming the Lanham Act into a handy device to reach, and decide all sorts of local law questions. Not surprisingly, although the Act has been interpreted in literally hundreds of appellate cases since its enactment in 1946, we cannot find a single case that purports to extend the Act to allow federal judges to interpret and enforce municipal regulations, thereby affording plaintiffs remedies over and above those provided by local law.

Instead of bringing this claim in federal court, appellant should be forced to take its argument to the D.C. Taxicab Commission and lobby the Commission to crack down on appellees’ activities, assuming they are proscribed under Order No. 4. If the Commission truly considers the meaning of Order No. 4 to be “obvious,” as our dissenting colleague suggests, Dissent at 5, then Dial A Car should easily be able to obtain redress. However, to use the Lanham Act as a backdoor method of prosecuting this case in federal court is completely unwarranted.

III. CONCLUSION

For the foregoing reasons, the judgment of the District Court, dismissing appellant’s claims, is affirmed.

So ordered.

1 . 15 U.S.C. § 2 (1994) states: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed gtulty of a felony....”

2 . We note that, although appellees’ alleged anti-competitive activity, according to the complaint, dates back at least to 1990, see Compl. at ¶41, reprinted in J.A. 14, no facts have been alleged to indicate that any company (including Dial A Car) is even close to being driven from the Blue Car market. This hardly indicates a dangerous probability of successful monopolization.

3 . We agree with the dissent that, hypothetically speaking, a regulation might conceivably be drafted that would be so clear on its face that no good faith doubt concerning its interpretation would be possible, even without an explicit statement from the Taxicab Commission. However, given that Order No. 4 does not even address the issue of Blue Car service, we have no trouble finding that the regulatory framework in this case is, at the very least, ambiguous with regard to the legality of appellees’ activity. Indeed, we note that, although our dissenting colleague interprets Order No. 4 one way, the trial, judge, viewing the same regulation, suggested that his reading of the statute might well be exactly the opposite, see Dial A Car, 884 F.Supp. at 592 (“[I]t is not even clear on the face of ... Order No. 4 that it applies to transportation services of the kind Red Top and Barwood are alleged to have provided in the District of Columbia.”). In light of.this disagreement, we certainly cannot say that the regulation was so clear as to be a fact for Lanham Act purposes.

4 . Although appellant did submit a supporting declaration of the General Counsel in an attempt to establish that appellees' activities were proscribed under Order No. 4, this declaration merely stated the opinion of the author and did not purport to speak for the Commission. Further, although the declaration, refers to citations and warnings issued to Red Top and Barwood by the Commission, there is no claim that the citations or warnings were issued in regard to appel-lees’ provision of Blue Car service, which is the interpretive question at issue in this case. Thus, we find that the trial court acted within its discretion in refusing to consider the declaration.